EPA Admits Climate Rule Will Raise Electricity Prices

4:25 PM 06/02/2014 | Business

Michael Bastasch | Energy Editor

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In 2008, Barack Obama said his energy plan would cause electricity prices to “necessarily skyrocket.” The Environmental Protection Agency’s latest power plant regulations seem designed to do just that.

The EPA’s own regulatory analysis of its rule to cut carbon dioxide emissions from existing power plants says it will hike retail electricity by as much as 6.5 percent by 2020 — all while forcing 19 percent of the U.S. coal-fired capacity to shutdown and decreasing coal production by up to 28 percent.

“Under the provisions of this rule, EPA projects that approximately 46 to 49 GW of additional coal-fired generation (about 19% of all coal-fired capacity and 4.6% of total generation capacity in 2020) may be removed from operation by 2020,” the EPA says in its regulatory impact analysis of the Obama administration’s Clean Power Plan.

The decrease in coal-fired power will also cause natural gas prices to rise up to 11.5 percent as an additional 1.2 trillion cubic feet of natural gas is used to make up for the lack of coal power in 2020.

“Average retail electricity prices are projected to increase in the contiguous U.S. by 5.9% to 6.5% in 2020,” the agency reported. Prices will have increased by about 3 percent by 2030, the agency added. But the EPA added that electricity prices will fall by nine percent after 2030 because of lower energy demand and increased energy efficiency further cuts consumption.

Despite the energy price increases, the Obama administration and its environmentalist allies have hailed the regulation as a major step in tackling global warming and improving public health.

“The EPA’s proposal to limit carbon pollution from power plants for the first time ever is a giant leap forward in protecting the health of all Americans and future generations,” Frances Beinecke, president of the Natural Resources Defense Council, said in a statement.

The NRDC released a study last week arguing the EPA’s power plant rule would save Americans $37.4 billion on their electric bills in 2020 and create 274,000 jobs — a much more optimistic prediction than even the EPA put forward.

But the U.S. Chamber of Commerce reported that EPA’s power plant rule would increase peoples’ energy costs by $17 billion per year. In total, the EPA rule would cost the U.S. economy $50 billion annually and kill 224,000 jobs per year.

Previous EPA regulations have already set the stage for skyrocketing electricity prices. The Mercury Air Toxics Standard (MATS), which comes in full effect in 2016, has already been predicted to force many coal plants to shut down and help drive up electricity costs.

The U.S. Energy Information Administration (EIA) says “low natural gas prices and slower growth of electricity demand” have hurt coal’s competitiveness as a power source. But a major reason why coal plants are shutting down is because they “must comply with requirements of the Mercury and Air Toxics Standards (MATS) and other environmental regulations.”

Closing coal plants will drive up natural gas prices by 150 percent over 2012 levels by 2040, this cost rise will cause electricity prices to jump seven percent by 2025 and 22 percent by 2040. EIA does not predict power prices declining after 2030 due to lower demand and increased energy efficiency.

EIA notes that “because natural gas prices are a key determinant of wholesale electricity prices, which in turn are a significant component of retail electricity prices. Accordingly, the cases with the highest delivered natural gas prices also show the highest retail electricity prices.”

EPA estimates the power plant rule to cost more than $7 billion in 2020 and nearly $9 billion in 2030, but will deliver $93 billion in “climate and public health benefits”.

Even with the ostensibly huge benefits of the rule, Republicans some Democrats have come out against it, saying it’s a backdoor energy tax on Americans.

“Make no mistake, the administration’s proposed rule is nothing more than a national energy tax that will be yet another sucker punch to middle-class families struggling to get by in the Obama economy,” said South Dakota Republican Sen. John Thune.

“These regulations, which will increase electricity costs, will especially hurt low-income families and seniors who live on fixed incomes and already devote a large share of their income to electricity bills,” Thune said. “In addition to hurting families, the regulations will destroy jobs, while essentially doing nothing to improve our global environment. The president’s proposed regulations are lose-lose-lose.”

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